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The systemic risk buffer

The purpose of the systemic risk buffer is to suppress the systemic risk arising from the potential destabilisation of relevant banks. The destabilisation of any of these banks could undermine confidence in the banking sector’s ability to provide its services effectively. This, in turn, could have serious adverse effects on the financial system and the Czech economy as a whole.

The Czech National Bank’s decision on which banks will be required to maintain the buffer and on the buffer rates to be applied is based on an estimate of the systemic importance of each bank made using a number of indicators describing four key parameters of the bank: size, complexity, substitutability and interconnectedness (see the first thematic article in FSR 2012/2013 (pdf, 252 kB)).

Domestic banks have different degrees of estimated systemic importance, and the systemic capital buffer rates required of banks by the Czech National Bank depend on this degree. Specifically, the buffer is only set for banks that occupy the top few places in the notional ranking of systemic importance.

Systemic risk buffer rates were set for the four systemically most important banks on 1 November 2014. As a result of the first regular review of the set of banks required to maintain the systemic risk buffer, which was conducted in 2016, the buffer was set for the five systemically most important banks with effect from 1 January 2017. A second review was made in 2018. On the basis of the updated degrees of domestic systemic importance, the Czech National Bank decided to leave the systemic risk buffer rates unchanged. The Czech National Bank will review the reasons for setting the SRB rate at least once every two years.